LONDON (Reuters) – Two Bank of England officials unexpectedly voted to lower interest rates due to signs of a deeper economic slowdown, and others said they would consider a cut if global and Brexit headwinds did not lift.
Below are comments from Mark Carney at a news conference after the BoE announcement:
ON THE GLOBAL ECONOMY
“It’s important to step back sometimes and not lose sight of the big picture. Globally that big picture has darkened.”
ON A BREXIT DEAL
“Now it’s become possible that the picture in the UK could change, with the recent UK-EU withdrawal agreement creating the prospects for a pick-up in UK growth.
“The pace of that recovery will depend critically on the extent to which uncertainty over the future UK-EU trading relationship actually dissipates, and, to a much lesser degree, by how much the global economy actually picks up.
“Both are assumed in the MPC’s latest projections, neither is assured.”
ON BREXIT UNCERTAINTIES
“As has been the case for some time Brexit uncertainties are dominating, weighing particularly hard on business investment, which unusually during an expansion has contracted in five of the past six quarters and is currently estimated to be just half a percent higher than at the time of the referendum.”
ON GOVERNORSHIP TRANSITION
“On the other side of the election, I’m sure the government, whoever is in the government, will take that decision in an orderly fashion but we’ll make sure that the transition is smooth and orderly…,” he said.
ON PROVIDING REINFORCEMENT
“The biggest driver of the move in inflation are temporary factors. Petrol prices are down a bit, sterling is up a bit, so you get some pass-through from that, but then most importantly, regulated water and energy prices, decisions that have been taken by Ofwat and Ofgem respectively, are going to move… inflation down.”
“We would look through, particularly the last of those, as you would expect.”
“In the event that some of the downside risk to the forecast materialise, given the starting point of the economy… and given where inflation is, underlying inflation, not those temporary moves, then if we didn’t see the expected reduction in uncertainty and therefore the pick-up in activity, or if, importantly, the global economy weren’t to stabilise as we are projecting that it will… then there may be a need to provide some reinforcement. But that’s not pre-committing to anything, it’s observing the balance of risks on the forecast.”
ON TECTONIC FORCES
“These are pretty big tectonic forces operating right now… Is the global economy turning and what is the impact going to be, or what is the trajectory going to be, in terms of the implementation of the agreed deal between the UK and the EU.”